Frequently Asked Questions

Everything you need to know about home loans in one place. Use our "frequently asked questions" section to learn everything about mortgages, refinancing, home equity lines of credit and more.

Home Loans for First-Time Home Buyers

Getting Your First Home Loan

You’ve found the one.

The house of your dreams!

Now all you have to do is buy it. While buying a home can be an overwhelming process, it doesn’t have to be intimidating. If you’re prepared and have a clear understanding of the various loan types and terms, buying a home will be an empowering process. And as a first-time homebuyer, you should have a positive experience. Who knows, this may lead to bigger home investments in the future. But we’re getting ahead of ourselves. First, we need to establish the different kinds of loans for a first-time buyer like you.

How do you choose from the many financial services available? Well, each product has an intended market, so it’s important to understand your needs so you can select the right home loan for you.

Fixed Rate Mortgages for First-Time Home Buyers

A fixed-rate mortgage is one of the most frequently used loans today. This is due to its easy to understand and straightforward system. The principal and interest payment amounts are fixed throughout your loan term. If you choose a 30-year term, your monthly payments will not change over that time period. This loan can be appealing during times of low-interest rate offerings. If you lock in a low rate, you can make steady payments while achieving gains on your home over time. This is also the best loan for families or individuals who plan to stay in their home for a long time.

The fixed-rate mortgage is ideal for the first-time home buyer because there are no surprises. This loan is predictable and safe, leaving you with a payment schedule you can trust. You’ll be able to budget and plan with confidence knowing that payments won’t rise to unmanageable levels. Besides, owning a home is a huge undertaking on its own. You’ll be able to spread out your payments over 30 years or less, if you feel you can make larger payments.

Adjustable Rate Mortgages for First-Time Home Buyers

Adjustable-rate mortgages (ARM), also called variable-rate mortgages, are another type of loan for first time home buyers. It has adjustable interest rates that are subject to the market. Many who use this type of loan believe that interest rates can decrease as the market cost of borrowing decreases.

With ARMs, the interest rate for the initial period is usually lower than a fixed-rate mortgage. The only difference is that after that 5 or 7 year period, your interest rate may rise or fall depending on the index rate and other factors.

Hybrid Mortgages for First-Time Home Buyers

Hybrid mortgages are a blend of fixed and variable-rate mortgages. They come in the popular packages of 5/1 ARM or the 7/1 ARM. The loans begin with a fixed rate and then switches to a variable rate 5, 7, or 10 years later. They’re ideal for homeowners who move constantly or work in real estate development. The only risk is what happens to your interest rate after that initial period. If rates rise and you are unable to sell your home for some reason, you will be subject to unpredictable interest rates.

Another type of hybrid mortgage is designed for borrowers who cannot make the hefty 20% down payment required for a fixed rate mortgage. Many lenders in the mortgage industry offer combination loans which enable a lower down payment with a variable rate home equity line of credit (HELOC). Down payments are cut in half while helping you get one step closer to homeownership.

FHA Loans for First-Time Home Buyers

The Federal Housing Administration (FHA) home loans are government guaranteed. Ideal for a young, first-time homebuyer, the FHA loan has minimal qualifying standards and favorable rates and terms. This loan was created for those who cannot yet meet the requirements for a fixed-rate mortgage.

There are few loan products that have such favorable features as the FHA’s low down payment requirement and flexible credit score rules. First-time home buyers will benefit because they’re still building their credit and most likely have not reached their peak earning years. Studies show that people earn their highest wages in their 40’s and 50’s.

Because FHA loans are secured by the federal government and have better systems to handle a default, it allows a higher approval rate. First-time buyers will benefit from lower mortgage rates, even though this type of loan does come with mandatory long-term mortgage insurance (PMI).

VA Loans for First-Time Home Buyers

Veterans Affairs (VA) loans are a home loan guaranteed by the U.S. Department of Veterans Affairs. This loan is meant for members of the military who are currently serving or have served

VA loans are ideal for first-time homebuyer’s who have served in the military. There are many benefits, but the no down payment is the most noteworthy. The VA loan allows financing for the full price of the entire home.

Additionally, there is no private mortgage insurance (PMI) required. Usually, with reduced down payment requirement, a PMI is needed in the case of default as a way to protect the lender. But the VA loan does not require a down payment or mortgage insurance, making it a true no money down option.

The Department of Veterans Affairs (VA) works to help veterans and active military members become homeowners. The lenient requirements are made possible because of the government’s backing.

Other Programs Specifically for First-Time Home Buyers

Down payment grants are financial assistance programs that seek to make homeownership a reality by reducing or eliminating the need for a down payment (similar to the VA’s loan program).

While assistance varies, the minimum down payment grant is $3000. For a homebuyer purchasing a house with a 3.5% down payment requirement, $3000 would significantly help. Loan eligibility depends on need and grant applicants are required to put all liquid assets and savings above $10,000 towards a down payment. Grants are for those who would genuinely struggle to part with a 3.5% down payment.

The entire loan process can take up to 8 weeks. So for the first-time home buyer there is plenty of time to sort through your various loan options, see what programs and grants can help, and buy your home with ease.

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Thanks so much! After our robots finish processing your information, our team will complete a 10-person sack race to determine who gets the pleasure of assisting you. The winner will be in touch soon! In the meantime, stick around and read about all things home loans on our site.